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The U.S. and China are kicking off a new round of trade talks Thursday in Washington and the pieces of a partial deal are already surfacing. Here’s what we know as negotiations get underway:
Some of the offerings aren’t a huge surprise. Chinese officials are reportedly bringing pledges to buy 30 million tons of U.S. soybeans in the marketing year that started Oct. 1 — about the same amount it was purchasing annually before the trade war started. It may also offer to buy 300,000-400,000 tons of pork and 3-4 million tons of American wheat.
What’s in it for China? A lifting of restrictions on Huawei perhaps. As a gesture of U.S. goodwill, President Donald Trump gave the go-ahead to grant licences to some American companies to sell non-sensitive goods to the Chinese telecom giant, according to the New York Times.
Another interesting wrinkle appeared overnight. Bloomberg’s Jenny Leonard is reporting that the White House wants to roll out a previously agreed currency pact as part of a truce that would mean the U.S. suspends an Oct. 15 tariff increase.
According to people familiar with the currency text, it largely resembles the language the U.S. inked in a 2018 agreement with Mexico and Canada, and also incorporates transparency commitments included in Group of 20 statements. The Treasury branded China a currency manipulator in August.
The U.S.-Mexico-Canada Agreement, which lawmakers in Washington have yet to ratify, says the signatories “should” maintain a market-set exchange rate; refrain from competitive devalution, including through intervention; and strengthen underlying economic fundamentals in pursuit of economic and currency stability.
Sounds straight-forward enough, but a big issue for the Chinese will be maintaining sovereignty over a key tool of domestic policy — the yuan — and they won’t surrender it in a trade agreement with their biggest economic rival. For U.S. Trade Representative Robert Lighthizer, the key in all this will be the enforceability of any agreement — in other words, what can the U.S. do if China doesn’t abide by it.
Charting the Trade War
In the history of Trump’s presidency, tweets mentioning China have tended to be bad news for the S&P 500. The good news is, he’s been tweeting about it less.
Today’s Must Reads
- FX pledges | The White House is looking to roll out a previously agreed currency pact with China as part of a preliminary deal that could also see a tariff increase next week suspended.
- Seeking a settlement | France doesn’t want the EU to become the next front in a global trade war, but the bloc would hit the U.S. with sanctions if a settlement isn’t reached in a dispute over aircraft aid.
- German struggles | A trade-inflicted industry slump in Europe’s biggest economy is deepening as a new data showed imports declined for a third month in August and exports also fell.
- India’s demands | The world’s second-most populous nation will insist on measures to prevent dumping of goods as part of its key demands at a meeting to finalize a pan-Asian trade deal.
- Stephanomics podcast | Jeannette Neumann visits a region in Spain with the lowest fertility rate in Europe to find out why this is happening and what it means for the global economy.
- Saving face | A currency deal could be a practical, face-saving way for the U.S. and China to reach a mini deal.
- Dollar value | Is the dollar at record high? Real measures say no.
- Oct. 10-11: U.S.-China talks in Washington
- Oct. 14: China trade balance for September
- Oct. 15: U.S. to raise tariffs on Chinese imports
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--With assistance from Eddie van der Walt.
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